Fitbit Forecasts Lower Profit for 2nd Quarter

By Reuters

May 4, 2016

The wearable fitness device maker Fitbit on Wednesday forecast profit for the current quarter that fell far short of analysts’ estimates, overshadowing a strong first-quarter report and sending the company’s shares down 13 percent in after-hours trading.

Fitbit has been spending heavily to diversify its portfolio of colorful wristbands and clippable devices that track calories, sleeping patterns and heart rates, to better compete against rising rivals from Apple and Garmin, as well as to tap into new markets.

“The time to invest is now,” said the company’s chief financial officer, Bill Zerella. He added that Fitbit would need to increase spending in China and India as it builds a “global brand.”

Fitbit’s operating costs nearly tripled to $215 million in the first quarter, which ended April 2, largely because of marketing for the $200 Blaze smartwatch and the Alta wristband, the company’s first global releases.

Fitbit forecast an adjusted profit of 8 to 11 cents a share for the second quarter, widely missing analysts’ average estimate of 26 cents, according to Thomson Reuters I/B/E/S. But it slightly raised its forecast for full-year revenue and profit.

Net income attributable to common stockholders fell to $11 million, or 5 cents a share in the first quarter, from $15.6 million, or 22 cents a share. Excluding one-time items, Fitbit earned 10 cents a share, breezing past analysts’ average expectation of 3 cents.

The company said it sold 4.8 million connected health and fitness devices in the quarter. Worldwide sales of wearable devices are expected to grow 18.4 percent in 2016, to 274.6 million, according to research firm Gartner.

Shares of Fitbit are down 42 percent this year through Wednesday’s close of $17.10.